Friends
of the Chicago Public Library
Freedom to Read AwardUnion League Club, Chicago
November 1, 1996

We
are all but a product of our parents, our education, and
our experiences.

I
was only nine when we arrived in the United States, but
what an unusual history I had already endured. I was party
to a miraculous escape—the only family to escape
from Bialystok, Poland, intact at the outbreak of World
War II. I was the product of fear, danger, strategy, and
luck. I had witnessed my parents playing hide and seek
with the Gestapo and the KGB. I had spent two weeks on
the Trans-Siberian railroad and traversed three-quarters
of the way around the globe. I had been taught in six languages:
Yiddish, Polish, Lithuanian, Russian, Japanese, and English.
I had been baptized into my parents’ movement whose
ideal was human dignity and equality for all. And I had
learned firsthand the harsh realities of political dictatorship.
While I had a great deal of trouble with playing baseball
in my new homeland or adjusting to new friends and a new
social order, I had forged an inner resolve that would
see me through.

In
a very real sense, I was saved from the ovens of Treblinka
by the eighteenth-century philosopher Moses Mendelssohn,
the little hunchback from the Dessau ghetto in Germany
and grandfather of composer Felix Mendelssohn. Mendelssohn
together with dramatist Gotthold Lessing had become the
pioneers of Jewish emancipation and advocated that Judaism
must leave the ghetto.

It
was this movement, a century later, that snared my father,
Isaac Moishe Melamdovich, and mother, Feygl Barakin, into
its current and carried them into the era of new enlightenment.
In doing so, the movement wrestled them away from the all-consuming
religious moorings of the shtetl and replaced it with an
ethnic identity based on biblical morality, the printed
word, the Yiddish language, and the ideals of one of the
prevalent political movements of the day.

My
parents were ardent Bundistn, a Jewish faction of the Socialist
movement that fought for the working man, was adamantly
opposed to communism, and was eternally committed to preserving
Yiddish as the language of the Jewish masses. Indeed, my
parents were both Yiddish school teachers in the parochial
schools of Bialystok. Their new bible included the writings
of the giants of Jewish literature: Sholem
Aleichem (Peace
be with you—Salomon
Rabinovitch—from the original Sholom
Nochem Veviks)
on whose writings Fiddler
on the Roof is
based; Mendele
Mocher Sforim (Mendel
the Bookseller—Shalom
Jacob Abramowits); and Itzchok L. Peretz, the philosopher-writer
who taught the Jewish masses that morality was the highest
of all the commandments.

My
parents were among the intellectuals of Poland, leaders
in a movement that demanded equal rights for Jews along
with all nationalities. They were building a new utopian
world, one based on freedom of thought and equality for
all. The movement had catapulted my father to its forefront
and resulted in his election to Bialystok’s City
Council; for a Jew, an honor without parallel. My mother
was one of the pioneers of the modern women’s movement,
outspoken in social affairs and an equal breadwinner in
our household. Indeed, one of her favorite songs was Beethoven’s
Ninth Choral symphony with Friedrich von Schiller’s
words, “Alle Menchen Seinen Breeder,” “All
humans are brothers.”

Alas,
on September 1, 1939, the Nazis marched into Poland, shattered
Schiller’s ideal and all normalcy. Although at the
time we didn’t know it, our destiny was to be doomed
along with 6 million other Jews of Eastern Europe.

Miraculously
fate intervened. Moses Mendelssohn’s movement had
provided my father with an escape route. Bialystok councilmen,
my father included, were advised to leave the city lest
they be taken as hostages by the Nazis. My father had to
make the painfully difficult decision to escape and leave
his wife and only child behind. Fortunately he did. It
was the first of many life-or-death decisions made by Isaac
Melamdovich over the course of the next two years. They
were decisions in a chain of events that led the Melamdoviches
out of the clutches of both the Nazis and the Bolsheviks,
across the steppes of Siberia, through Japan courtesy of
Consul General Sugihara, and eventually to the freedom of these
shores.

But
no transition of this magnitude is without pain. Although
Chicago was a far cry from what was experienced by the
generations of immigrants who were thrust into the tenements
of New York’s Lower East Side, there were many similarities
and common ordeals. This was especially true for the children
who, like myself, were unmercifully immersed in a foreign
environment and left to cope with the unvarnished and often
cruel demands of their fellow compatriots. Indeed, I was
a struggling, unhappy, greenhorn kid until I entered Roosevelt
High School on the North Side of Chicago. Suddenly, it
was as if I were reincarnated. No one knew of my refugee
history, no one cared. At last I was accepted as an equal.

Life
in Chicago’s inner city for teens during the late
1940s was right out of J.D. Salinger’s Catcher
in the Rye.
We hung around the neighborhood drugstore, we had social
and athletic clubs; we had best friends and worst enemies;
we played baseball and basketball; we dated, loved, and
tried to make it with girls; we drove old beat-up cars;
we jitterbugged and crooned with Frankie Lane, Peggy Lee,
Perry Como, and Frank Sinatra; we listened to the radio
soaps and thrived on the adventures of Tom Mix, Captain
Midnight, and Jack Armstrong.

Then
came the 1950s and, while none of us knew it at the time
(no one does while it is happening), those were undoubtedly
the best years of our lives. Just as Diner and
other movies of note attempt to depict the years following
the end of World War II, life was relatively simple, well
organized, and pleasant. You followed the rules—whether
it was the rules of your family, your social sphere, or
the neighborhood. Although as young adults we sometimes
experimented with the forbidden and often skirted the niceties
of the social structure, we knew where the lines were drawn
and, for the most part, did not transgress them. Although
there was great social strife around us, it didn’t
frighten us; although there were street gangs, the inner
city streets were still safe; although there were reefers,
there was really no drug problem. Most of all, government
was still “good” and federal officials still
respected.

And
when we entered college, there was a world of literature
to be consumed: Lawrence Durrell, Ernest Hemingway, Aldous
Huxley, James Joyce, D.H. Lawrence, Thomas Mann, Henry
Miller, Erich Maria Remarque, and so many others that one’s
lifetime seemed far too short. These literary greats became
our personal friends, offering us a never-ending parallel,
albeit informal course of education. It is this beholdency
to literature that makes tonight’s Chicago Public
Library’s Freedom to Read Awardso
exceptionally meaningful to me. Books were always a profound
part of my life, I suppose a consequence of my parents’ deep-seated
respect for education and literature—after all, they
were teachers first and foremost.

And,
as I noted in Escape
to the Futures,
my zeal for education had a very practical application
in advancing the cause of futures markets. Futures were
an arcane and mysterious neck of the woods that most of
the world considered a sub-rosa activity, best left to
the zany and the gamblers. We were shunned, not only by
the public at large, not only by our respected cousins
on Wall Street, whose activities were really not so dissimilar,
but even by the financial media:

“It’s
ludicrous to think that foreign exchange can be entrusted
to a bunch of pork belly crapshooters,” so proclaimed
a prominent New York banker back in l972 on the eve of
the Merc’s launch of the International Monetary Market.

“The
New Currency Market: Strictly for Crapshooters,” echoed Business
Week.

And
the respected Economist in
1976 compared the International Monetary Market (IMM) to
Linda Lovelace, the girl with the deep throat. How dare
we, it asked, trade the sacred Treasury bill on the same
floor with pork bellies.

Derogatory
comments, defamatory innuendos, inflammatory jokes, false
accusations, misleading opinions, half-truths, out-and-out
lies—such has been the burden and fate of futures
markets. And why not? From time immemorial, predicting
the future has been a hazardous occupation. “Behead
the messenger of bad tidings!”

As
a result, I knew that our only hope was in education of
the public and made it a permanent fixture at the Merc:
workshops, seminars, global symposia, the publication of
books, brochures, trading analysis, the establishment of
programs and courses at colleges and universities, grants
for fellowships and studies, lecturers, educational programs,
and even permanent university chairs for the study of futures.

But
I’ve gotten ahead of the story. Back in the 1950s
there was also politics. In our college crowd, political
interaction, whether by personal involvement or simply
by way of heated discussion, was a holy and daily ritual.
I was more fortunate than most. What better way to learn
civics than to experience the Joe McCarthy era from the
vantage point of John Marshall Law School. Gunner Joe represented
a very real danger to the basic tenets of individual freedom,
and this was critical to law students who, by definition,
were ardent protagonists of the American ideal and for
whom the Bill of Rights was a holy sacrament.

Indeed,
for college students of the 1950s era, the civil rights
movement that unfolded wasn’t a mere intellectual
exercise—something to be studied, to write essays
about, and to answer questions about—it was a living
monument, an everyday event, a happening in real time.
There was a revolution in the making before our very eyes
and the world was never to be the same. We were online
witnesses and participants—marchers in the marches,
singers of the songs—We
Shall Overcome! Montgomery,
Alabama, Martin Luther King Jr., Governor Orval Faubus, sit-ins
and boycotts, Justice William Brennan, the National Guard
in Little Rock: Those weren’t historical references,
they were our everyday newspaper headlines.

Earl
Warren was appointed as Chief Justice of the Supreme Court
by President Eisenhower just as I entered law school. What
better way to study the magnitude of Brown
v. Board of Education—that
segregation was a violation of the equal protection clause
of the 14th Amendment to the U.S. Constitution—than
from within Professor Braunfeld’s classroom where
constitutional law was alive and the only subject that
mattered.

But
constitutional law meant much, much more for me than the
14th Amendment: It put into focus for this law student
the rights of the individual as measured against the rights
of the state. Constitutional law became an intellectual
learning experience that opened for me an entire new thought
process and a roadway to my understanding of capitalism.
Whereas my father’s socialism focused on the betterment
of society as a whole, capitalism focused on the betterment
of the individual to the benefit of society as a whole.
This proved to be a cataclysmic revelation and caused a
revolutionary reversal in my inherited beliefs. Ultimately
it brought this young patriot to the realization that the
socialistic concepts of his parents were in conflict with
precepts of the free market and contrary to the very essence
of the American success story—and were wrong!

One
day I privately confronted my father on this issue. He
and I quite often engaged in serious discussions of a political
or social nature. Sometimes these discussions became quite
heated, and on occasion ended in shouting matches that
to my children, who watched from a respectful distance,
no doubt seemed like arguments of a life-threatening nature.
Actually, I considered my father the smartest man I ever
met, our discussions notwithstanding. His instinctive feel
for an idea or situation was nothing short of uncanny.

In
most matters, my father, who was highly opinionated, would
take the so-called traditional European and intellectual side,
and I, what was to him the modern American and superficial point
of view. For instance, one of his favorite topics was the
American preoccupation with sports, which to his way of
thinking, except that which was practiced in school, was
a complete waste of time; anyone sitting around listening
or watching a sports event was allowing his brain to atrophy.
In similar fashion, but to a much harsher degree, he detested
card-playing of any sort, which for him was the unquestionable
work of the devil and a direct path to a life of depravation
and sin. My love of tournament bridge was a source of unending
grief to my father and a topic of constant discussion.

But
on this occasion my father was unusually subdued and thoughtful.
Yes, he admitted, in America some of the old notions under
socialism had less validity, but, he explained, it was
a hard-fought-for transformation: The workers of America
had won most of the demands which he and his fellow European
socialists had stood for and never achieved. It took, he
said, the American union movement and socialist ideals
to overturn the sweatshop mentality of the early 1900s.
Now, my father agreed, an individual had the ability to
pursue his or her own dreams, which could result in a betterment
of society as a whole.

Not
too many years later, the economic lessons and theory learned
in constitutional law at John Marshall Law School could
suddenly be put into practice. The floor of the Chicago
Mercantile Exchange became the laboratory. But by then,
this student of law had fervently embraced Milton Friedman’s
conviction that the story of the United States was a story
of two separate but interdependent miracles: an economic
miracle and a political miracle. Each miracle based on
a separate set of revolutionary ideas, both of which by
a curious coincidence were formulated in 1776.

One
set of ideas was embodied in the Adam Smith’s The
Wealth of Nations.
It established that an economic system could succeed only
in an environment that allowed the freedom of individuals
to pursue their own objectives for purely personal gain.
The second set of ideas, drafted by Thomas Jefferson, was
embodied in theDeclaration
of Independence. It
proclaimed a set of self-evident truths: that
all men are created equal, that they are endowed by their
Creator with certain unalienable Rights; that among these
are Life, Liberty, and the pursuit of Happiness.
The success of our nation, as Milton Friedman asserted
and Merton Miller will certainly attest, is a consequence
of the combination of these two basic ideals. Economic
freedom coupled with political freedom. One without the
other cannot work.

As
chairman of the Chicago Mercantile Exchange, this graduate
of John Marshall Law School was provided an opportunity
to implement these ideals in an exchange that was but a
backwater marketplace with a questionable future, dealing
in butter, eggs, and onions. The process involved some
diverse and special ingredients:

First,
as I already mentioned, it required a modern rule book,
for without law and order, no economic house can exist.
Next it required a bit of imagination coupled with a healthy
dose of innovation. Then it needed a great deal of good
luck. As futures traders, all we ever asked for was maybe
a little war, some pestilence, a couple of floods, an occasional
famine. On this occasion the Almighty was very generous.
We were benefactors of a world in chaos. I daresay, if
ever one needed proof that “necessity is the mother
of invention,”
one need only review the economic disorders leading up to and
following the creation of the International Monetary Market.

For
a setting, there was, of course the breakdown of Bretton
Woods, the system of fixed exchange rates. Then on August
15, 1971, President Nixon closed the gold window, releasing
a seismic economic shock with financial reverberations
to be felt even a decade later. This precipitated unprecedented
economic disarray, which included the oil embargo of 1973.
What followed was an era of financial turmoil rarely equaled
in modern history: The U.S. dollar plunged; U.S. unemployment
reached in excess of 10 percent; oil prices skyrocketed
to $39 a barrel; the Dow Industrial Average fell to 570;
gold reached $800 an ounce; U.S. inflation climbed to 20
percent; and interest rates went even higher. What more propitious environment could one ask for to test the brand new Black-Scholes Options Model?

For
us it was a virtual paradise. These events ensured that
the IMM’s formula for successful innovation based
on necessity of the times would be a sure-fire success.
Indeed, in May of 1986, precisely 14 years after its inception,
Merton H. Miller bestowed upon the IMM a supreme and unparalleled
honor by nominating financial futures as
“the most significant financial innovation of the last
twenty years.”

The
process also required people who could be molded into an
army, an army of traders—for
no one person alone could do what had to be done. They
came from all walks of life, and as I stated in Escape, they
had two common denominators: tenacity and a dream! I described
them in this little poem which I read at the IMM’s
10th anniversary:

Who
were we?We
were a bunch of guys who were hungry.We
were traders to whom it did not matter-whether
it was eggs or gold, bellies orthe
British pound, turkeys or T-bills.We
were babes in the woods, innocents,in
a world we did not understand,too
dumb to be scared.We
were audacious, brazen, raucous pioneers-too
unworldly to know we could not win.That
the odds against us were too high;That
the banks would never trust us;That
the government would never let us;That
Chicago was the wrong place.

The
final ingredient was a tribute to my parents’ equality
ideal. The markets we built epitomized Schiller’s Alle
Menchen Seinen Breeder. No,
it is not utopia yet, but I know of no other private sector
establishment that is more free of human prejudice and
less concerned with race, gender, or religion than are
the free market structures of American finance.

Indeed,
tonight’s master of ceremonies, Terry Savage, is
a first-class example of the Merc’s nondiscrimination
ideology—and living proof of the equality between
genders. In 1967, one of my first actions was to expunge
the discriminatory rule at the Merc which prohibited floor
participation by females. Terry was one of the early women
to come to our pits, hold her ground with the male traders,
and learned economics from the bottom up. As I stated in
the book, Terry was smart enough to parlay her acquired
trading skills into a career as a superb national business
newscaster. Similarly, my personal friend and former bridge
partner Carol (Mickey) Norton, who was the first lady trader
at the IMM—indeed, the first in futures markets.
She too never gave an inch in the male-dominated world
of futures, and became one of the outstanding traders of
the era.

Yes,
in our markets, the trophy goes not to the Catholic or
the Jew, not to the white or the black, not to the man
or the woman, it goes to those who understand the economic
principles of supply and demand. No, it is not utopia yet,
but in Chicago’s financial markets it is not what
you are—your personal pedigree, your family origin,
your physical infirmities, your gender—but your ability
to determine what the customer wants and where the market
is headed. Little else matters.

As
an eight-year old sitting on that Trans-Siberian train
and staring out the window for days on end, I could no
more imagine the course my life would take—that I
would escape to the futures—than I can today discern
what the world will be like, say, 50 years from now. We
are all captives of events and circumstances over which
we have so little control. In my case, fortune was most
generous. It offered me the opportunity to partake in the
American miracle. And if this refugee has in any small
way contributed to the precepts of Thomas Jefferson and
principles of Adam Smith, he is humbled, but it
is not to his credit. He is after all but a product of
his parents, his education, and his experiences.